The Agony & The Ecstasy:  1099 Requirements

Just when you'd heard that 1099 requirements had become more onerous and complex (they had), comes the news from the Feds that the expansion of 1099 reporting has been repealed.

This truly is one of the rare times I know of that the Taxpayers outcry and huge number of phone calls and e-mails to Congress was actually effective.  

The new rules would have required that a 1099-Misc be sent out, even if the goods or services had been purchased from a corporation - including payments for merchandise, which had not previously been the case.  This would have forced small businesses to track payments to individual vendors like OfficeMax on an annual basis, for everything they had paid for the previous year.  Any business paying more than $600/year to a corporation would have been required to send a 1099 to that corporation.  If it had been rolled out, the PPAC/SBJ acts would have increased the tax paperwork burden of small businesses enormously.

Additionally, owners of "passive" real estate investments, such as vacation homes, would have been required to file Form 1099-Misc and their homes would have been considered as businesses for 1099 purposes.  Landlords would also have been required to issue 1099-Misc to service providers, which had not been the case in the past.

Fortunately, in April 2011, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act repealed both of these 1099-Misc reporting requirements.  This act rolled the 1099 reporting status back to what it had been before the PPACA and SBJA had been enacted in 2010.  

A 1099-Misc is now - as it was - used to report rents, royalties, prizes and awards not for services, payments for services performed, gross proceeds paid to attorneys, and other various income sources not reported on other forms.  For most categories, a 1099-Misc must be filed for amounts paid of $600 or more to a person or entity, except for royalties, which must be reported in any amount over $10.

Form 1099-Misc is an information return and no tax is due with its filing. The 1099-Misc must be sent to the payee and a copy must be sent to the Internal Revenue Service (electronically or in paper form) with the Form 1096.  Form 1099-Misc must be issued by January 31st, for information from the previous year.  The Form 1096 with copies of the 1099’s must be filed with the Internal Revenue Service by Feb. 28^th.

E-mail or call my office with questions.